6 Months of Savings—Really?

You’ve been hearing that you need a six-month emergency fund for years. But the advice—while it sounds commonsense enough—just doesn’t work for many people.

In fact, most Americans don’t have an emergency fund: a recent survey by the National Bureau of Economic Research showed that 50% of us would have a hard time coming with a spare $2,000 in a crisis.

For some, lack of cash is the issue. But for many, the bigger problem with the six-month edict is that personal finance standards often bear no relation to your personal reality. When that disconnect happens, it’s easy to feel paralyzed and just do nothing.

To get moving again, you need to look beyond the mythic idea that there’s one six-month gold standard to attain, and think astutely about your own situation, says Brad Klontz, a financial psychologist and a financial planner. Start by asking yourself the following questions:

What’s your idea of an emergency? Many people have a curveball fund for life’s unpredictable expenses—and an emergency fund for a dire crisis. But how do you define your terms? If an illness or death would signify a crisis for you, how much would you need for those? If you’d consider a job loss one of life’s curveballs, you’d better have several months of expenses in that account. The stock advice to keep three to six months of expenses on hand is just a starting point.

What’s your job? Whether you consider losing your job a full-blown emergency or not, having liquid cash on hand to cover a period of unemployment is key. But then you need to pick an amount that makes sense to save—and that depends on your industry, profession, and so on.

For instance, if you’ve been in your field for 20 years, it may be tough to find a job at the same level of income. In that case, says Klontz, you might need to set aside more. If you’re self-employed, and dependent on companies that don’t pay as quickly as you’d like, you might also need more than six months stashed away.

What’s your comfort zone? Ask just about anyone how much cash they need in their wallet or purse to feel safe, and you’ll get wildly different answers—from, “Nothing, I have a credit card” to “I like to carry $500.” It’s the same with emergency funds. “Some people need a year’s worth of cash in the bank to feel emotionally okay,” Klontz says. “Others need two years.”

What’s preventing you from saving as much as you know you should? The answer, in part, may lie in your upbringing, says Klontz. One of his clients, a woman who made upward of $150,00 a year, had virtually no savings.

Turns out her older siblings used to raid her piggy bank when she was little, and continued tapping her for cash as they grew into adulthood. Her unconscious defense: By having no money, she could say “no” to her family honestly. “Understanding the past really opens peoples’ eyes to the present so they can see what going on right now and make informed decisions,” says Klontz. Once his client realized what was going on, it was easier for her to undertake the relatively simple task of putting a little aside every month.

Bottom line: You need to decide for yourself, wisely, what makes sense and feels comfortable, given your profession and the state of your life. Take the time to muse over whether something in your childhood is influencing your financial behavior. If you say the words “emergency fund,” do any feelings pop up? Usually there’s a story that reveals a lot, says Klontz. Paying attention to that can help you replace an old pattern with a new one.